Investors looking for stocks in the Financial - Investment Management sector might want to consider either Federated Investors (FII - Free Report) or Hargreaves Lansdown plc (HRGLY - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Federated Investors is sporting a Zacks Rank of #2 (Buy), while Hargreaves Lansdown plc has a Zacks Rank of #3 (Hold). This means that FII's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
FII currently has a forward P/E ratio of 12.41, while HRGLY has a forward P/E of 34.39. We also note that FII has a PEG ratio of 1.58. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. HRGLY currently has a PEG ratio of 2.84.
Another notable valuation metric for FII is its P/B ratio of 3.42. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, HRGLY has a P/B of 20.31.
Based on these metrics and many more, FII holds a Value grade of B, while HRGLY has a Value grade of F.
FII sticks out from HRGLY in both our Zacks Rank and Style Scores models, so value investors will likely feel that FII is the better option right now.